Jobs, jobs, jobs. April was yet another busy month on the employment front, with another 175,000 jobs added to the United States workforce – that’s according to last Friday’s Labor Department report. However, the unemployment rate rose from 3.8% to 3.9%, defying the expectations of labor analysts. What gives?
As it turns out, April’s job growth was somewhat lower than forecast. The Dow Jones consensus was that 240,000 jobs would be added, enough to keep the unemployment rate steady. Not only did they miss the mark, the larger “jobless rate,” which factors in part-time work and other considerations, rose to 7.4%. That’s the highest it’s been since November 2021.
Should we be celebrating instead of being concerned? Definitely; more jobs is not always better, and judging by Friday’s report, the U.S. economy is in better shape now than it was last month. Let’s dig deep, peel back the layers, and see why everything looks so rosy right now.
Why Is More Unemployment Better?
In an ideal world, everyone looking for a job gets a job. But in a world with 0% unemployment, all the jobs are filled, which means everything is static – no upward mobility, no further vocational training or higher education.
This 0% world is also a breeding ground for inflation. All those workers making all that money and buying stuff leads to higher prices. Then the wages have to go up to make the workers happy, and the cycle continues.
Things don’t always work out like that in the real world. Sometimes you have periods of stagflation, like back in the 1970s when both inflation and unemployment were high. But generally speaking, a truly healthy economy is one with a certain “Goldilocks” amount of unemployment, maybe somewhere between 5% and 6.7%, according to the U.S. Federal Reserve.
Does The U.S. Have Too Many Jobs?
It seems that way. The U.S. Chamber of Commerce reported last week that there were 8.8 million job openings and only 6.4 million unemployed people to fill them.
This has been a problem for a while now. It’s why you’ll often hear employers grumbling about how kids these days don’t want to work – they’d rather stay at home and trade crypto. But it really has more to do with the COVID-19 pandemic; the U.S. labor force participation rate fell from 63.3% in February 2020 to 60.1% that April, and has slowly inched its way back up to 62.7% since.
Granted, there are larger cultural concerns when it comes to the quality of the jobs being added, and the whole concept of “wage slavery” in general. But until we’re all making a Universal Basic Income and free to live our lives as we see fit, somebody needs to fill all those empty spots on the payroll – or businesses will have to close their doors.
We’ve helped create well over 15 million jobs since I took office.
Wages are rising faster than prices.
Unemployment has been below 4% for 27 months in a row.
There’s more work to do, and we will keep fighting for hardworking families.— Joe Biden (@JoeBiden) May 7, 2024
What Is The Fed Doing About It?
This is where the optimism comes in. The Federal Reserve, which is the central bank of the United States, can help strike that perfect Goldilocks balance between inflation and unemployment by moving interest rates higher or lower. When interest rates go up, it helps “cool” the economy and bring inflation down; when interest rates go down, people (including businesses) borrow and spend more money, and inflation goes up.
Interest rates shot up considerably after the pandemic, when people were staying home and collecting their “stimulus” checks. Then the stock market went down. But now that the economy has largely recovered, interest rates are starting to go down again – just not as quickly as investors would like.
Earlier this year, market analysts expected the Fed to initiate a series of three rate cuts this year, starting in May and bringing interest down from around 5.5% to 5%. But stronger job reports and higher inflation caused the Fed to press pause; now they’re only expected to cut rates once, maybe in September, maybe in November.
That’s still the plan, but April’s job report gives analysts confidence that the Fed will indeed follow through on that expectation. As a result, stock markets went up after Friday’s report was released. So did the price of Bitcoin, which rose from around US$62,000 to its current price of $63,575.65 as we go to press.
We’re still not quite in that Goldilocks zone that some analysts are touting at the moment. But the forecast does look a fair bit sunnier than it did earlier this year. It’s springtime in America again.
